Chancellor Rishi Sunak has warned the economy is expected to shrink by 11.3% this year and will not return to its pre-COVID size until the end of 2022.
Setting out his winter Spending Review, the Chancellor said the Coronavirus pandemic had done “lasting” damage to the economy and warned: “Our economic emergency has only just begun.”
Key findings from the review and statistics released by the Government’s independent forecaster, the Office for Budget Responsibility (OBR) include:
- Economy will have contracted 11.3% in 2020, the largest fall for more than 300 years
- Economy forecast to grow by 5.5% next year and by 6.6% in 2022
- Output not expected to return to pre-crisis levels until the fourth quarter of 2022
- Unemployment is expected to reach 7.5% next spring, with 2.6m people out of work
- Borrowing forecast to hit £394bn this year, equivalent to 19% of GDP, the highest ever in peacetime
- UK debt will be equivalent to 91.9% of GDP this year and rise to 97.5% of GDP in 2025/26
- In 2025, the economy will be around 3% smaller than was expected in March Budget forecast
- Unemployed predicted to rise to 2.6 million
- A new £4.6bn package to help people back to work
- £2.6bn for Restart scheme to support those out of work for 12 months
- £1.6bn for the Kickstart scheme to subsidise jobs for young people
- £375m skills package, including £138m to provide Lifetime Skills Guarantee
- New £4bn “levelling up” fund to finance local infrastructure improvement projects
- New UK infrastructure investment bank to be established in North of England
- £18bn for Covid testing, PPE and vaccines
- An extra £2bn for public transport, including subsidies for the rail network
British Chambers of Commerce Director General, Adam Marshall, said: “This spending review comes at a critical time as business communities are fighting for survival in the midst of the Coronavirus pandemic.
“The launch of the National Infrastructure Strategy is an important step in overcoming the longstanding infrastructure deficit. We’ve spent long enough discussing infrastructure projects – it’s now time to focus on delivery.
“Measures to help people return to work at this challenging time will help limit long-term unemployment but Government must waste no time in putting these plans into action.
“Government and business will need to work together to re-train and re-skill the UK workforce. Investment in the Kickstart Scheme, in which Chambers are playing a leading role, and the launch of the Restart scheme, will be critical in helping to achieve that.
“With an uncertain winter ahead, the government will need to maintain an open mind on providing further support to businesses struggling to survive. As we look to rebuild and renew local and national economies, businesses will also need further significant incentives for investment in people, productivity and the planet.”